Unassociated Document


     Exhibit
10.1

     

    SECURITIES
PURCHASE AGREEMENT (“Agreement”) dated as
of  November 30, 2009, between Sino Gas International Holdings, Inc.,
a Utah corporation (the “Company”), and each
person or entity listed as a Purchaser on Schedule I attached
to this Agreement (collectively and individually, the “Purchaser”).  Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Note.

     

    WITNESSETH:

     

    Whereas,
the Company desires to sell and issue to the Purchasers, and the Purchasers wish
to purchase from the Company, the 8% Senior Secured Convertible Notes in the
aggregate principal amount of up to Ten Million United States dollars (“Dollars”)
($10,000,000), subject to a twenty percent (20%) overallotment in the Company’s
sole discretion, substantially in the form attached hereto as Exhibit A (each a
“Note” and
collectively, the “Notes”) and warrants
(the “Warrants”; together
with the Notes, the “Securities”) to
purchase shares (“Warrant Shares”) of
the Company’s common stock par value $.001 (the “Common Stock”)
substantially in the form attached hereto as Exhibit B, on the
terms and conditions set forth herein (such transactions may be referred to as
the “Offering”
or the “Transaction”).

     

    Now,
Therefore, in consideration of the foregoing premises and the covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

     

    ARTICLE
I

     

    Purchase and Sale of
Note

     

    Section
1.1       Issuance of
Note.  Upon the following terms and conditions, the Company
shall issue and sell to the Purchaser, and the Purchaser shall purchase from the
Company, the Notes.  Each Note shall be convertible into shares of
Common Stock (the “Conversion Shares”)
on the terms and conditions contained in the Notes.

     

    Section
1.2       Purchase Price.  The purchase
price for the Securities to be acquired by the Purchasers shall be equal to 100%
of the face amount of the Notes being acquired (the “Purchase
Price”).  The parties hereto agree that for U.S. federal income
tax purposes, the issue price of the Notes shall be not less than 99.25% of
their principal amount.

     

    Section
1.3       The
Closing.  Following the Initial Closing, there may be multiple
closings (together with the Initial Closing, each, a “Closing”) hereunder
on such other date or dates as the Company and the purchasers purchasing
Securities on such date may agree (together with the Initial Closing Date, each,
a “Closing
Date”); provided that the final Closing Date shall be no later than
December 30, 2009.  On the Closing Date, the Company shall deliver to
the Purchaser the Securities purchased hereunder, registered in the name of such
Purchaser or its nominee.  On or prior to the Closing Date, the
Purchaser shall deliver the Purchase Price (the “Escrowed Funds”) by
certified check made payable to the order of “Signature Bank, as Escrow Agent
for Sino Gas International Holdings, Inc.” or by wire transfer of immediately
available funds:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Wire
transfers to the Escrow Agent shall be made as follows:

     

    Wire
transfers to the Escrow Agent shall be made as follows:

     

    ABA#:
026013576

     

    Account#:
1500984569

    


    Re: Sino
Gas International Holdings, Inc. Signature Bank as escrow agent

     

    Attention:
Eva Gayer

     

    In
addition, each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Closing.  The Securities will be fully owned and paid for by the
Purchaser as of the Closing Date.  The account with Signature Bank
(the “Escrow
Agent”) shall be referred to herein as the “Escrow Account” and
such agreement setting forth the terms of the escrow arrangement, the “Escrow
Agreement”.  Unless the minimum amount of $4,000,000 is sold by
December 30, 2009 (the “Termination Date”),
or by March 1, 2010 (the “Final Termination
Date”) if the Termination Date has been extended by Company and the
Placement Agent, the Offering shall terminate and all funds shall be returned by
Escrow Agent to the Purchasers as per the terms of the Escrow
Agreement.

     

    Section
1.4       Warrant.  In
addition to the Note, at the Closing, the Company will execute and deliver to
each Purchaser a Warrant to purchase a number of shares of Common Stock equal to
forty percent (40%) of the number of Conversion Shares into which the Notes are
convertible on the Closing Date.  Such warrants shall have a three (3)
year term and an exercise price equal to $0.744 per share (the “Exercise
Price”).

     

    Section
1.5       As used herein, “Trading Day” shall
mean a day on which there is trading on the OTC Bulletin Board or such other
market or exchange on which the Common Stock is then principally
traded.

     

    ARTICLE
II

     

    Representations and
Warranties

     

    Section
2.1      Representations and
Warranties of the Company.  The Company hereby makes the
following representations and warranties to the Purchasers as of the date hereof
and the Closing Date:

     

    (a) Organization and Qualification;
Material Adverse Effect.  The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of Utah
and has the requisite corporate power to own its properties and to carry on its
business as now being conducted.  Except where specifically indicated
to the contrary, all references in this Agreement to subsidiaries shall be
deemed to refer to all direct and indirect subsidiaries of the
Company.  Each Subsidiary has been duly incorporated and is in good
standing under the laws of its jurisdiction of incorporation.  The
Company and each Subsidiary is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would not have a
Material Adverse Effect.  “Material Adverse
Effect” means any adverse effect on the business, operations, properties,
prospects or financial condition of the Company and its subsidiaries, and which
is (either alone or together with all other adverse effects) material to the
Company and its Subsidiaries, if any, taken as a whole, and any material adverse
effect on the transactions contemplated under the Transaction Documents (as
defined below).  “Subsidiary” or “Subsidiaries” means
any Person (defined below) of which the Company and/or any of its other
Subsidiaries (as herein defined) directly or indirectly owns at the time at
least fifty percent (50%) of the outstanding voting
securities.  “Person” means an
individual, corporation, partnership, joint venture, trust, university, or
unincorporated organization, or a government, or any agency or political
subdivision thereof.

     

    
      
         

      

      
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    (b) Authorization;
Enforcement.  (i)  The Company has all requisite
corporate power and authority to enter into and perform its obligations under
the Transaction Documents and to issue the Notes and Warrants in accordance with
the terms hereof, (ii) the execution and delivery of the Transaction Documents
by the Company and the consummation by it of the transactions contemplated
hereby and thereby, including the issuance of the Notes and Warrants, have been
duly authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors (or any committee or
subcommittee thereof) or stockholders is required, (iii) the Transaction
Documents have been duly executed and delivered by the Company, (iv) the
Transaction Documents constitute valid and binding obligations of the Company
enforceable against the Company, except (A) as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of creditors’ rights and remedies or by other equitable principles of general
application, and (B) to the extent the indemnification provisions contained in
this Agreement may be limited by applicable federal or state securities laws and
(v) the Notes and the Warrants, and the Conversion Shares and Warrant Shares
issuable upon the conversion and/or exercise thereof, have been duly authorized
and, upon issuance thereof and payment therefor in accordance with the terms of
this Agreement, will be validly issued, fully paid and non-assessable, free and
clear of any and all liens, claims and encumbrances.

     

    (c) Capitalization.  As
of the date hereof, the authorized capital stock of the Company consists of
250,000,000 shares of Common Stock, of which as of the date hereof, 26,769,313 shares
are issued and outstanding and  150,000
shares are issuable and reserved for issuance pursuant to the Company’s stock
option plans and certain outstanding contracts, or securities exercisable or
exchangeable for, or convertible into, shares of Common Stock and 100,000,000
shares of Preferred Stock, of which as of the date hereof 5,000,000 shares have
been designated as Series B Preferred Stock of which 4,579,839 shares of Series
B Preferred Stock are outstanding, 3,000,000 shares have been designated Series
B-1 Preferred Stock of which 95,418 shares are outstanding and 20,000,000 shares
have been designated Series A Preferred Stock, of which 0 shares are
outstanding.  All of such outstanding shares have been, or upon
issuance will be, validly issued, fully paid and nonassessable.  As of
the date hereof, except as disclosed in Schedule 2.1(c), (i)
no shares of the Company’s capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company, (ii) there are no outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the Securities Act of 1933, as amended (“Securities Act” or
“1933 Act”)
(except for Section 6.2 of this Agreement), (v) there are no outstanding
securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, and (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance or
exercise of the Notes or Warrants as described in this Agreement.  The
Company has furnished to the Purchasers true and correct copies of the Company’s
Certificate of Incorporation, as amended and as in effect on the date hereof
(the “Certificate of
Incorporation”), and the Company’s By-laws, as in effect on the date
hereof (the “By-laws”), and the
terms of all securities convertible or exchangeable into or exercisable for
Common Stock and the material rights of the holders thereof in respect
thereto.  Schedule 2.1(c) also
lists all outstanding debt of the Company with sufficient detail acceptable to
Purchaser.

     

    
      
         

      

      
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    (d) Issuance and Ownership of
Securities.  Upon issuance in accordance with this Agreement
and the terms of the Notes, the Warrants and the Warrants issued to Axiom
Capital Management, Inc. (“Axiom” or the “Placement Agent”) as
placement agent (the “Placement Agent
Warrants”), the Conversion Shares and the Warrant Shares and the common
shares underlying the Placement Agent Warrants, will be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof.   The Company owns all outstanding shares
of the Subsidiaries, free and clear of any liens and other encumbrances except
as set forth in Schedule 2.1(d), and
there are no outstanding options, warrants or other rights to purchase equity of
any Subsidiary other than as set forth on Schedule
2.1(d).

     

    
      
         

      

      
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    (e) No
Conflicts.  Except as disclosed in Schedule 2.1(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby and issuance of the Notes and Warrants, and the Conversion Shares and
Warrant Shares underlying any of the foregoing will not (i) result in a
violation of the Certificate of Incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock of the
Company or the By-laws; (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or (iii) to the Company’s knowledge result
in a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws and regulations and
the rules and regulations of the OTC Bulletin Board or other principal
securities exchange or trading market on which the Common Stock is traded or
listed (“Principal
Market”)) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except in the case of clause (i), such conflicts that would not
have a Material Adverse Effect.

     

    (f) SEC
Documents.  Since the filing of its Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 2009, the Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “1934 Act”) (all of
the foregoing filed prior to the Closing Date and all exhibits included therein
and financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the “SEC
Documents”).  To the Company’s knowledge, as of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.  There
are no outstanding comment letters from the SEC relating to any of the SEC
Documents.

     

    
      
         

      

      
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    (g) Absence of
Litigation.  There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company’s Subsidiaries or any of the Company’s or the
Company’s Subsidiaries’ officers or directors in their capacities as such the
effect of which could reasonably be expected to result in a Material Adverse
Effect (i) except as set forth in SEC Documents which were filed at least
two business days before the date hereof and (ii) except as set forth in Schedule
2.1(g).

     

    (h) No Integrated Offering.
Neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to the Purchaser to be integrated
with prior offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of the Principal Market or Subsequent Market, nor will
the Company or any of its Subsidiaries take any action or steps that would cause
the offering of the Securities to be integrated with other
offerings.

     

    (i) Employee
Relations.  Neither the Company nor any of its Subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company or any of its
Subsidiaries, is any such dispute threatened, the effect of which would be
reasonably likely to result in a Material Adverse Effect.  Neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement.

     

    (j) Intellectual Property
Rights.  The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now
conducted.  The Company and its Subsidiaries do not have any knowledge
of any infringement by the Company or its Subsidiaries of trademarks, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service mark registrations, trade secret or other similar rights
of others, or of any such development of similar or identical trade secrets or
technical information by others and, except as set forth on Schedule 2.1(j), there is no claim,
action or proceeding being made or brought against, or to the Company’s
knowledge, being threatened against, the Company or its Subsidiaries regarding
trademarks, trade name rights, patents, patent rights, inventions, copyrights,
licenses, service names, service marks, service mark registrations, trade
secrets or other infringement.

     

    
      
         

      

      
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    (k) Compliance with
Law.  The business of the Company and its Subsidiaries has been
and is presently being conducted so as to comply with all applicable material
foreign, federal, state and local governmental laws, rules, regulations and
ordinances.

     

    (l) Environmental
Laws.  The Company and its Subsidiaries (i) are to the
Company’s knowledge in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (“Environmental Laws”),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in com­pliance with all terms and conditions of any such permit,
license or approval where such noncompliance or failure to receive permits,
licenses or approvals referred to in clauses (i), (ii) or (iii) above could
have, individually or in the aggregate, a Material Adverse Effect.

     

    (m) Disclosure. No representation
or warranty by the Company in this Agreement, nor in any certificate, schedule,
document, exhibit or other instrument delivered or to be delivered pursuant to
this Agreement or otherwise in connection with the transactions contemplated by
the Transaction Documents, contains or will contain any untrue statement of
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading or necessary to in
order fully and fairly to provide the information required to be provided in any
such certificate, schedule, document, exhibit or other instrument.  To
the knowledge of the Company and its Subsidiaries at the time of the execution
of this Agreement, there is no information concerning the Company and its
Subsidiaries or their respective businesses which has not heretofore been
disclosed to the Purchasers (or disclosed in the Company’s filings made with the
SEC under the 1934 Act) that would have a Material Adverse Effect.

     

    (n) Title.  The Company
and its Subsidiaries have good and marketable title to all real property and
good and marketable title or valid land use rights granted by relevant
authorities in the People’s Republic of China to all personal property owned by
them which is material to the business of the Company and its Subsidiaries, in
each case free and clear of all liens, encumbrances and defects except such as
are described in Schedule 2.1(n) or
such as do not materially and adversely affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company or any of its Subsidiaries.  Any real property and facilities
held under lease by the Company or any of its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries.

     

    
      
         

      

      
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    (o) Insurance.  The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
such insurance is available and management of the Company believes to be prudent
and customary in the People’s Republic of China and in the businesses in which
the Company and its Subsidiaries are engaged.  All such insurance
policies are described on Schedule
2.1(o).

     

    (p) Permits.  The
Company and each of the Company’s Subsidiaries owns, holds, possesses, or
lawfully uses in its business all material approvals, authorizations,
certifications, franchises, licenses, permits, and similar authorities (“Permits”) that are
necessary for the conduct of their business as currently conducted or the
ownership and use of their assets or properties, in compliance with all
Laws.  All of such material Permits are listed on Schedule 2.1(p), and
true, complete and correct copies of each Permit listed on Schedule 2.1(p) have
been provided to the Purchasers.  Neither the Company nor any of the
Company’s Subsidiaries is in default under, or has received any notice of any
claim of default in respect of, any such Permits.  To the Company’s
knowledge, after due inquiry, all such Permits are renewable by their respective
terms in the ordinary course of business without the need to comply with any
special qualification procedures or to pay any amounts other than routine filing
fees.

     

    (q) Foreign Corrupt Practices
Act.  To the Company’s knowledge, neither the Company, nor any
director, officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary has, in the course of acting for, or on behalf of, the
Company, directly or indirectly used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; directly or indirectly made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or any similar treaties of
the United States; or directly or indirectly made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.

     

    (r) Tax Status.  The
Company and each of its Subsidiaries has made or filed all United States federal
and state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject and all such returns, reports and
declarations are true, correct and accurate in all material respects; except
where failure to make or file such returns, reports, or declarations would not,
individually or in the aggregate, have a Material Adverse Effect.  The
Company has paid all taxes and other governmental assessments and charges, shown
or determined to be due on such returns, reports and declarations, except those
being contested in good faith, for which adequate reserves have been
established, in accordance with generally accepted accounting principles (“GAAP”).

     

    
      
         

      

      
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    (s) Issuance of Conversion Shares and/or
Warrant Shares.  The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance and, upon conversion of the Notes
and/or exercise of the Warrants, as applicable, in accordance with the terms
thereof, such Conversion Shares and/or Warrant Shares will be validly issued,
fully paid and non-assessable, free and clear of any and all liens, claims and
encumbrances and the holders of such Conversion Shares and/or Warrant Shares
shall be entitled to all rights and preferences accorded to a holder of Common
Stock.  As of the date of this Agreement, the outstanding shares of
Common Stock are currently quoted on the OTC Bulletin Board.

     

    (t) Absence of Undisclosed
Liabilities.  The Company and its Subsidiaries have no
obligations or liabilities of any nature (matured, fixed or contingent) other
than (i) those adequately provided for in the Company’s financial statements
referenced in Section 2.1(u) and (ii) those obligations incurred in the ordinary
course of business in amounts consistent with prior periods which have not had
and will not have a Material Adverse Effect on the Company.

     

    (u) Financial
Statements.  Except as set forth in Schedule 2.1(u), the
financial statements of the Company included in the Forms 10-K and the Forms
10-Q of the Company have been prepared from the books and records of the
Company, in accordance with GAAP, and fairly present in all material respects
the financial condition of the Company, as at their respective dates, and the
results of its operations and cash flows for the periods covered
thereby.

     

    (v) Employee
Benefit Plans; ERISA.

     

    (i)           Schedule 2.1(v) sets
forth a true, correct and complete list of all employee benefit plans, programs,
policies and arrangements, whether written or unwritten (the “Company Plans”), that
the Company, any Subsidiary or any other corporation or business which is now or
at the relevant time was a member of a controlled group of companies or trades
or businesses including the Company or any Subsidiary, within the meaning of
section 414 of the Internal Revenue Code of 1986, as amended (the “Code”), maintain or
have maintained on behalf of current or former members, partners, principals,
directors, officers, managers, employees, consultants or other
personnel.

     

    (ii)           There
has been no prohibited transaction within the meaning of Section 406 of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section
4975 of the Code, with respect to any of the Company Plans; (ii) none of the
Company Plans is or was subject to Section 412 of the Code or Section 302 or
Title IV of ERISA; and (iv) each of the Company Plans has been operated and
administered in all material respects in accordance with all applicable laws,
including ERISA.  There are no actions, suits or claims pending or
threatened (other than routine claims for benefits), whether by participants,
the Internal Revenue Service, the Department of Labor or otherwise, with respect
to any Company Plan and no facts exist under which any such actions, suits or
claims are likely to be brought or under which the Company or any Subsidiary
could incur any liability with respect to a Company  Plan other than
in the ordinary course.  None of the Company Plans is or was a
multiemployer plan within the meaning of Section 3(37) of ERISA.

     

    
      
         

      

      
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    (iii)          Neither
the Company nor any Subsidiary has announced, proposed or agreed to any change
in benefits under any Company Plan or the establishment of any new Company
Plan.  There have been no changes in the operation or interpretation
of any Company Plan since the most recent annual report, which would have any
material effect on the cost of operating, maintaining or providing benefits
under such Company Plan.

     

    (iv)          Neither
the Company nor any Subsidiary has incurred any liability for the
misclassification of employees as leased employees or independent
contractors.

     

    (v)           Except
as provided for in this Agreement and in the Transaction Documents, the
consummation of the transactions contemplated by this Agreement, either alone or
in combination with another event, will not (i) result in any individual
becoming entitled to any increase in the amount of compensation or benefits or
any additional payment from the Company or any Subsidiary (including, without
limitation, severance, golden parachute or bonus payments or otherwise), or (ii)
accelerate the vesting or timing of payment of any benefits or compensation
payable in respect of any individual.

     

    (w) Restrictions on Business
Activities.  There is no judgment, order, decree, writ or
injunction binding upon the Company or any Subsidiary or, to the knowledge of
the Company or any Subsidiary, threatened that has or could prohibit or impair
the conduct of their respective businesses as currently conducted or any
business practice of the Company or any Subsidiary, including the acquisition of
property, the provision of services, the hiring of employees or the solicitation
of clients, in each case either individually or in the aggregate.

     

    (x) Contracts.  Schedule 2.1(x) sets
forth all oral or written contracts, agreements, indentures, notes, bonds,
loans, instruments, leases, commitments, or other arrangements or commitments
(collectively, “Contracts”) to which
the Company or any of its Subsidiaries is a party or by which it is bound with a
value in excess of $75,000, in each case, of any of the following types
(collectively, the “Material
Contracts”):  (i) Contracts with any current or former officer
or director of the Company or any of the Company’s Subsidiaries or any other
employment, non-competition, severance, consulting, or similar agreement; (ii)
Contracts with any labor union or association representing any employee of the
Company or any of the Company’s Subsidiaries; (iii) Contracts for the sale of
any of the assets of the Company or any of the Company’s Subsidiaries other than
in the ordinary course of business or for the grant to any person of any
preferential rights to purchase any of their assets; (iv) joint venture
agreements; (v) Contracts containing covenants of the Company or any of the
Company’s Subsidiaries not to compete in any line of business or with any person
in any geographical area; (vi) Contracts relating to the acquisition by the
Company or any of the Company’s Subsidiaries of any operating business or the
capital stock of any other Person; (vii) Contracts relating to indebtedness; or
(viii) Contracts granting any registration or similar right in respect of
securities of the Company or any of the Company’s Subsidiaries.  There
have been made available to the Purchasers true and complete copies of all of
the Material Contracts and there are no other contracts material to the business
of the Company or any of its Subsidiaries.  Except as set forth on
Schedule
2.1(x), all of the Material Contracts and all other Contracts of the
Company and the Company’s Subsidiaries are in full force and effect and are the
legal, valid, and binding obligations of the Company and/or the Company’s
Subsidiaries, enforceable against them in accordance with their terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium, and similar
laws affecting creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).  Except as
set forth on Schedule
2.1(x), neither the Company nor any of the Company’s Subsidiaries is in
default in any material respect under any Material Contract or any other
Contract of the Company and its Subsidiaries, nor, to the Company’s knowledge,
after due inquiry, is any other party to any such Contract in default thereunder
in any material respect.

     

    
      
         

      

      
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    Section
2.2     Representations and
Warranties of the Purchaser.  The Purchaser hereby makes the
following representations and warranties to the Company as of the date hereof
and the Closing Date:

     

    (a) Accredited Investor Status;
Sophisticated Purchaser.  The Purchaser is an “accredited
investor” as that term is defined in Rule 501(a) of Regulation D under the 1933
Act.  The Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of the Note, the Warrant, the Conversion Shares and the Warrant
Shares.  The Purchaser is not registered as a broker or dealer under
Section 15(a) of the 1934 Act, affiliated with any broker or dealer registered
under Section 15(a) of the 1934 Act, or a member of the Financial Industry
Regulatory Authority, Inc. (FINRA).

     

    (b) Information.  The
Purchaser and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company which have been
requested and materials relating to the offer and sale of the Note, the Warrant,
the Conversion Shares and the Warrant Shares which have been requested by the
Purchaser.  The Purchaser and its advisors, if any, have been afforded
the opportunity to ask questions of the Company.  In determining
whether to enter into this Agreement and purchase the Securities, the Purchaser
has relied solely on the written information supplied by Company employees in
response to any written due diligence information request provided by Purchaser
to the Company, and the Purchaser has not received nor relied upon any oral
representation or warranty relating to the Company, this Agreement, the
Securities, or any of the transactions or relationships contemplated
thereby.  The Purchaser understands that its purchase of the
Securities and Conversion Shares, and if applicable, the Warrant Shares involves
a high degree of risk.  The Purchaser has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Note and the Warrant
and, if applicable the Conversion Shares and the Warrant Shares.

     

    (c) No Governmental
Review.  The Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Note, the Warrant,
the Conversion Shares and Warrant Shares or the fairness or suitability of the
investment in the Note, the Warrant, the Conversion Shares and Warrant Shares
nor have such authorities passed upon or endorsed the merits
thereof.

     

    
      
         

      

      
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    (d) Legends. The Company shall
issue the Note and the Warrants and, if applicable, certificates for the
Conversion Shares and the Warrant Shares, to the Purchaser without any legend
except as described in Article VI below.  The Purchaser covenants
that, in connection with any transfer of Conversion Shares or Warrant Shares by
the Purchaser pursuant to the registration statement contemplated by Section 6.2
hereof, it will comply with the applicable prospectus delivery requirements of
the 1933 Act, provided that copies of a current prospectus relating to such
effective registration statement are or have been supplied to the
Purchaser.

     

    (e) Authorization;
Enforcement.  This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Purchaser and is a valid and
binding agreement of the Purchaser enforceable against the Purchaser in
accordance with their terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.  The
Purchaser has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and each other agreement entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement.

     

    (f) No Conflicts.  The
execution, delivery and performance of this Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated hereby will not
(i) result in a violation of the certificate of incorporation, by-laws or other
documents of organization of the Purchaser, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Purchaser is bound, or (iii) result in a violation of any law, rule,
regulation or decree applicable to the Purchaser.

     

    (g) Investment
Representation.  The Purchaser is purchasing the Securities for
its own account for investment and not with a view to distribution or sale in
violation of the 1933 Act or any state securities laws or rules and regulations
promulgated thereunder.  The Purchaser has been advised and
understands that neither the Note, nor the Warrant, nor the Conversion Shares or
Warrant Shares issuable upon conversion or exercise thereof have been registered
under the 1933 Act or under the “blue sky” laws of any jurisdiction and may be
resold only if registered pursuant to the provisions of the 1933 Act and any
applicable “blue sky” laws, or if an exemption from registration is available,
except under circumstances where neither such registration nor such an exemption
is required by law.  The Purchaser has been advised and understands
that the Company, in issuing the Note and the Warrant, is relying upon, among
other things, the representations and warranties of the Purchaser contained in
this Section 2.2 in concluding that such issuance is a “private offering” and is
exempt from the registration provisions of the 1933 Act.

     

    
      
         

      

      
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    (h) Rule 144.  The
Purchaser understands that there is no public trading market for the Notes or
Warrants, that none is expected to develop, and that the Notes and Warrant must
be held indefinitely unless and until such Notes and Warrants, or if applicable,
the Conversion Shares or Warrant Shares received upon conversion or exercise
thereof are registered under the 1933 Act or an exemption from registration is
available.  The Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the 1933 Act, including the limitations
on the availability thereof.

     

    (i) Brokers.  Except
with respect to the fees owed to Axiom under the PAA, the Purchaser has taken no
action which would give rise to any claim by any person for brokerage
commissions, finder’s fees or similar payments by the Company or the Purchaser
relating to this Agreement or the transactions contemplated hereby.

     

    (j) Reliance by the
Company.  The Purchaser understands that the Note and the
Warrant are being offered and sold in reliance on a transactional exemption from
the registration requirements of Federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Purchaser to acquire the Note and the Warrant, and the
Conversion Shares and Warrant Shares issuable upon conversion or exercise
thereof.

     

    ARTICLE
III

     

    Covenants

     

    Section
3.1       Registration and Listing;
Effective Registration.  Until such time as the Notes are no
longer outstanding and the Warrants have expired, the Company will cause the
Common Stock to continue at all times to be registered under Sections 12(b) or
(g) of the 1934 Act, will comply in all material respects with its
reporting and filing obligations under the 1934 Act, and will not take any
action or file any document (whether or not permitted by the 1934 Act or
the rules thereunder) to terminate or suspend such reporting and filing
obligations.  Until such time as the Note and Warrant are no longer
outstanding, the Company shall use its best efforts to continue the listing or
trading of the Common Stock on the Principal Market or one of the Subsequent
Markets and shall comply in all material respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Subsequent Market
on which the Common Stock is listed.  The Company shall use its
commercially reasonable efforts to cause the Conversion Shares and Warrant
Shares to be listed on the Principal Market or one of the other Subsequent
Markets and shall use its best efforts to continue such listing(s) on one of the
Subsequent Markets, for so long as the Note or Warrant are
outstanding.

     

    
      
         

      

      
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    Section
3.2       Certificates on
Conversion.  Upon any conversion by the Purchaser (or then
holder of the Note) of the Note pursuant to the terms thereof, the Company shall
issue and deliver to the Purchaser (or holder) within seven (7) Trading Days of
the conversion date certificates for the Securities into which the Note is
convertible and, if applicable, a new Note or Notes for the aggregate principal
amount which the Purchaser (or holder) has not yet elected to convert but which
are evidenced in part by the Notes submitted to the Company in connection with
such conversion (with the denominations of such new Note(s) designated by the
Purchaser or holder).

     

    Section
3.3       Replacement
Notes.  The Note held by the Purchaser (or then holder) may be
exchanged by the Purchaser (or such holder) at any time and from time to time
for Note(s) with different denominations representing an equal aggregate
principal amount of Note(s), as requested by the Purchaser (or such holder) upon
surrendering the same at the expense of the Purchaser.

     

    Section
3.4       Securities
Compliance. The Company shall notify the SEC and the Principal Market, in
accordance with their requirements, of the transactions contemplated by this
Agreement, the Note, the Warrant,  and the Pledge and Guarantee
Agreement, as applicable, and any other ancillary documents contemplated by such
agreements, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Notes and Warrants hereunder and the Conversion Shares and
Warrant Shares issuable upon conversion or exercise thereof.

     

    Section
3.5       Notices.  The
Company agrees to provide all holders of Notes with copies of all notices and
information, including without limitation, notices and proxy or information
statements in connection with any meetings that are provided to the holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such Common Stock holders; it being understood that the Company’s
obligations under this Section 3.5 shall be limited to sending such notices and
information to the address of the Purchaser listed on Schedule I attached
hereto or notified to the Company from time to time pursuant to Section
9.7.

     

    Section
3.6       Reservation of Shares; Stock
Issuable Upon Conversion.  The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the Note and
exercise of the Warrant, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of the Notes, exercise of
the Warrants and exercise of the Placement Agent Warrant.

     

    Section
3.7      Best
Efforts.  The parties shall use their best efforts to satisfy
timely each of the conditions described in Article V of this
Agreement.

     

    
      
         

      

      
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    Section
3.8       Form D; Blue Sky
Laws.  The Company agrees to file a Form D with respect to the
Notes, the Warrants, and Common Stock, in accordance with Regulation D and to
provide a copy thereof to the Purchaser promptly after such
filing.  The Company shall, on or before the Closing Date, take such
action as the Company shall have reasonably determined is necessary to qualify
the Notes, the Warrants, the Conversion Shares and Warrant Shares for sale to
the Purchaser under applicable securities or “blue sky” laws of the states of
the United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Purchaser on or prior to the
Closing Date; provided, however, that the Company shall not be required in
connection therewith to register or qualify as a foreign corporation in any
jurisdiction where it is not now so qualified or to take any action that would
subject it to service of process in suits or taxation, in each case, in any
jurisdiction where it is not now so subject.

     

    Section
3.9       Information.  The
Company agrees to send to the Purchaser for so long as the Note or Warrant are
outstanding copies of any notices and other information made available or given
to the stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders; it being understood that the
Company’s obligations under this Section 3.9 shall be limited to sending such
notices and information to the address of the Purchaser listed on Schedule I attached
hereto or notified to the Company from time to time pursuant to Section
9.7.

     

    Section
3.10     Prohibition on Net Short
Positions.  From and including the date of this Agreement and
for so long as the Purchaser holds any outstanding Notes, each Purchaser agrees
that it will neither sell any equity security of the Company short nor direct,
instruct or otherwise influence any of its affiliates, principals or advisors to
sell any such equity securities short.

     

    Section
3.11    Material
Changes.  On or before the Closing Date, the Company shall
forthwith notify the Purchasers of any material change affecting any of its
representations, warranties, undertakings and indemnity at any time prior to
payment being made to the Company on the Closing Date.

     

    Section
3.12     Prohibition on Certain
Actions.   The Company shall not, between the date hereof
and the Closing Date (both dates inclusive), take any action or decision which
(had the Note already been issued) would result in an adjustment of the
Conversion Price.

     

    Section
3.13     Senior Status of
Notes.   The obligations of the Company under the Notes
shall rank senior to all other debt of the Company and its Subsidiaries, whether
now or hereinafter existing. Beginning on the date of this Agreement and for so
long as any Notes remain outstanding, neither the Company nor any Subsidiary of
the Company shall, without the prior written consent of Purchasers holding a
majority of the aggregate outstanding Principal Amount of the Notes, which
consent shall not unreasonably withheld, incur or otherwise become liable with
respect to any indebtedness that would rank senior or pari passu to the Notes in
order of payment, other than (i) trade payables incurred in the ordinary course
of business, (ii) debt incurred pursuant to the Offering described herein; (iii)
the bank debt described on Schedule 3.13 hereof,
or (iv) indebtedness incurred by the Company and its Subsidiaries for working
capital purposes; provided, that, in no event shall the total debt incurred by
the Company pursuant this Section 3.13 (including the Notes) exceed five and
one-half (5.5) times the Company’s twelve months trailing EBITDA (earnings
before interest, taxes, depreciation and amortization).

     

    
      
         

      

      
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    Section
3.14     Use of
Proceeds.  The Company shall use the net proceeds from the sale
of the Securities hereunder substantially as set forth in Schedule 3.15 and not
for the satisfaction of any portion of the Company’s debt or to redeem any
Common Stock or Common Stock Equivalents.

     

    Section
3.15     Common Stock
Issuances. Except for the contemplated issuances of Common Stock set
forth in Schedule
2.1(c),
the Company shall not, during the period that any Note remains outstanding,
issue additional shares of Common Stock or securities exercisable or convertible
into Common Stock (“Common Stock
Equivalents”).

     

    ARTICLE
IV

     

    Other
Agreements

     

    Section
4.1       Participation in Future
Financings.  For so long as at least $1,000,000 aggregate
principal amount of the Notes remains outstanding, the Purchasers shall be
notified at least ten (10) days prior to any proposed equity financing
(including any proposed issuance of convertible debt securities) by the Company
and will be given a ten (10) day option to participate in such proposed
financing, on the same terms as the other proposed investors. In addition, the
Company shall provide the Purchasers with the opportunity to purchase a minimum
of thirty percent (30%) of the securities sold in such proposed
financing.

     

    Section
4.2       Transfer Agent
Instructions.  The Company shall issue irrevocable instructions
to its transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of the Purchaser or its respective nominee(s), for the
Conversion Shares or Warrant Shares in such amounts as specified from time to
time by the Purchaser to the Company upon delivery of a conversion or exercise
notice (the “Irrevocable Transfer Agent
Instructions”).  The Company warrants that no instruction
relating to the Conversion Shares or Warrant Shares other than the Irrevocable
Transfer Agent Instructions referred to in this Article IV will be given by the
Company to its transfer agent and that the Conversion Shares and Warrant Shares
shall be freely transferable on the books and records of the Company as
contemplated by Article VI below when the legend referred to therein may be
removed.  Nothing in this Article IV shall affect in any way any
Purchaser’s obligations and agreements set forth in Section 2.2(d) to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Conversion Shares or Warrant Shares.  The Company shall instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Purchaser and without any restrictive legends
except as contemplated by Article VI.

     

    Section
4.3       Funding of Post-Closing
Expenditures.  The Company agrees that it will maintain a bank
account in the United States to hold at least $500,000 of the proceeds from the
Offering, for a period of two years following the Closing Date, solely for the
purpose of funding the expenditures set forth on Schedule
4.3.

     

    
      
         

      

      
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    Section
4.4      Management
Lock-Up.  On or prior to the Initial Closing Date, the Company
will cause Yuchuan Liu to deliver “lock-up” letters substantially in the form of
Exhibit C (the
“Management Lock-up
Agreements”) pursuant to which such persons will agree not to sell any
shares of common stock of the Company until the earlier of (i) the second
anniversary of the Initial Closing date, or (ii) one hundred eighty (180) days
following the date on which the Company’s listing on a Major Stock Exchange (as
defined below) becomes effective.

     

    Section
4.5       Board Representation.
For so long as any Notes are outstanding, the Purchasers shall have the right to
designate one member of the Company’s Board of Directors (the “Noteholder Designee”)
and the Company agrees to appoint such Noteholder Designee to its Board of
Directors and submit the name of such Noteholder Designee for election in
connection with any election of directors of the Company..   The
Company agrees that it will not increase the size of its Board of Directors
beyond seven members for as long as the Notes are outstanding with the consent
of the holders of a majority of the outstanding Notes. In addition, for so long
as any Notes are outstanding, Purchasers representing a majority of the
outstanding  principal of the Notes shall have the right to appoint
one observer to participate (in person or electronically) in each meeting of the
Company’s Board of Directors.  The Company covenants and agrees that
following the Initial Closing Date it shall use its best efforts to cause a
majority of the members of the Board of Directors to be “independent directors”
as such term is defined in NASDAQ Marketplace Rule 5605(a)(2) unless compliance
with a different definition shall be required by the Major Stock Exchange on the
which the Common Stock is then listed.

     

    Section
4.6       Trading Migration and
Reverse Stock Split.  The Company covenants and agrees to use
its commercially reasonable efforts to complete a reverse split (the “Reverse Split”) of
its Common Stock within 360 days of the Initial Closing Date sufficient to meet
the minimum share price requirements of a Major Stock Exchange (defined below)
and file for a listing of the Common Stock thereon as soon as practicable
following the consummation of the Reverse Split.  For purposes of this
Section 4.6, “Major
Stock Exchange” shall mean the NASDAQ Capital Market, the New York Stock
Exchange, or the NYSE Amex Equities.

     

    Section
4.7       Purchase of Notes by
Management.   The members of the Company’s management team
shall collectively purchase an aggregate principal amount of Notes equal to at
least 3% of the total aggregate principal amount of Notes sold hereunder through
the final Closing Date (the “Management
Notes”).  The Conversion Shares underlying such Management
Notes shall not be subject to the restrictions provided for in the Management
Lock-up Agreements.

     

    ARTICLE
V

     

    Conditions
to Closings

     

    Section
5.1       Conditions Precedent to the
Obligation of the Company to Sell.  The obligation hereunder of
the Company to issue and/or sell the Securities to the Purchaser at the
applicable Closing is subject to the satisfaction, at or before the applicable
Closing, of each of the applicable conditions set forth below.  These
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion.

     

    
      
         

      

      
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    (a) Accuracy of the Purchaser’s
Representations and Warranties.  The representations and
warranties of the Purchaser will be true and correct in all material respects as
of the date when made and as of the Closing Date, as though made at that
time.

     

    (b) Performance by the
Purchaser.  The Purchaser shall have performed all agreements
and satisfied all conditions required to be performed or satisfied by the
Purchaser at or prior to the Closing, including full payment of the Purchase
Price to the Company as provided herein.

     

    (c) No Injunction. No statute,
rule, regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement, the Note, or the
Warrant.

     

    Section
5.2        Conditions Precedent to the
Obligation of the Purchaser to Purchase.  The obligation
hereunder of the Purchaser to acquire and pay for the Securities at the
applicable Closing is subject to the satisfaction, at or before the applicable
Closing, of each of the Company’s agreements contained herein required to be
performed on or prior to the Closing Date as well as the applicable conditions
set forth below.  These conditions are for the Purchaser’s benefit and
may be waived by the Purchaser at any time.

     

    (a) Accuracy of the Company’s
Representations and Warranties.  The representations and
warranties of the Company shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties as of an earlier date, which shall be
true and correct in all material respects as of such date).

     

    (b) No Injunction.  No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement, the Notes or the Warrant.  The Principal Market
shall not have objected or indicated that it may object to the consummation of
any of the transactions contemplated by this Agreement.

     

    (c) Legal Opinions.  At
the Closing, the Purchasers shall have received an opinion of U.S. counsel to
the Company substantially in the form attached hereto as Exhibit D-1 and
an opinion of counsel to the Company and each Subsidiary issued by a law firm
authorized to practice in the People’s Republic of China in the form attached
hereto as Exhibit
D-2.

     

    (d) Officer’s
Certificates.  The Company shall have delivered to the
Purchasers a certificate in form and substance satisfactory to the Purchasers
and the Purchasers’ counsel, executed by an officer of the Company, certifying
as to satisfaction of closing conditions, incumbency of signing officers, and
the true, correct and complete nature of the Certificate of Incorporation,
By-Laws, good standing and authorizing resolutions of the Company.

     

    
      
         

      

      
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    (e) Personal Guaranty. A personal
guaranty of the indebtedness evidenced by the Notes shall have been granted by
the Company’s Chief Executive Officer pursuant to a Guaranty (the “Guaranty”) in
substantially the form attached hereto as Exhibit
E.

     

    (f) Pledge Agreement. A security
interest in certain shares of a Subsidiary of the Company (and proceeds thereof)
pursuant to a Pledge Agreement (the “Pledge Agreement”)
substantially in the form attached hereto as Exhibit
F.

     

    (g) Warrants.  The
Company shall have executed and delivered the Warrants to the Purchasers in
substantially the form attached hereto as Exhibit
B.

     

    (h) No Material Adverse
Change.  There shall not have occurred any event prior to the
Closing which, singly or taken together with any other event, could reasonably
be expected to have a Material Adverse Effect.

     

    (i) Investment by
Management.   On or prior to the final Closing, the
members of the management team shall have collectively purchased an aggregate
principal amount of Notes equal to at least 3% of the Notes sold through the
final Closing Date up to a maximum of $300,000; provided, that, Management shall
have invested at least $100,000 in the Initial Closing.

     

    (j) Voting
Agreement.  The holders of a majority of the outstanding Common
Stock on the Initial Closing Date shall have delivered a voting agreement (the
“Voting
Agreement”) in substantially the form attached hereto as Exhibit
F containing their agreement to vote for the Noteholder Designee at
any election of directors of the Company.

     

    (k) Minimum Closing and Maximum
Offering.  On the Initial Closing Date, Securities with a
minimum aggregate Purchase Price of $5,000,000 shall be issued. The Initial
Closing Date shall occur no later than December 30, 2009. The maximum aggregate
Purchase Price for all Securities issued hereunder shall not exceed $10,000,000
(subject to a twenty percent (20%) overallotment in the Company’s sole
discretion).

     

    This
Agreement, the Notes, the Warrants, the Guaranty, the Pledge Agreement, the
Voting Agreement, and the Management Lock-Up Agreements are sometimes referred
to herein collectively as the “Transaction
Documents”.

     

    
      
         

      

      
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    ARTICLE
VI

     

    Legend and Stock;
Registration Rights

     

    Section
6.1       Legends.   Upon
payment therefor as provided in this Agreement, the Company will issue the Note
in the name each Purchaser or its designees and in such denominations to be
specified by such Purchasers prior to (or from time to time subsequent to)
Closing.  The Securities and any certificate representing Conversion
Shares or Warrant Shares issued upon conversion or exercise thereof, prior to
such Conversion Shares or Warrant Shares being registered under the 1933 Act for
resale or available for resale under Rule 144 under the 1933 Act, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:

     

    These
Securities Have Not Been Registered For Offer or Sale Under The Securities Act
Of 1933, As Amended, Or Any State securities laws.  They May Not Be
Sold Or Offered For Sale Except Pursuant To An Effective Registration Statement
Under Said Act And Any Applicable State Securities Law Or An Applicable
Exemption From Such Registration Requirements.

     

    The
Company agrees to reissue the Notes and any Conversion Shares and Warrant Shares
without the legend set forth above, at such time as (i) the holder thereof is
permitted to dispose of such Notes, Conversion Shares and Warrant Shares
issuable upon conversion or exercise of the foregoing pursuant to Rule 144(b)(i)
under the 1933 Act, or (ii) such securities are sold to a purchaser or
purchasers who (in the opinion of counsel to the seller or such purchaser(s), in
form and substance reasonably satisfactory to the Company and its counsel) are
able to dispose of such shares publicly without registration under the 1933 Act,
or (iii) such securities have been registered under the 1933 Act.

     

    Prior to
the Registration Statement (as defined below) being declared effective, any
Warrant Shares issued pursuant to exercise of the Warrant shall bear a legend in
the same form as the legend indicated above; provided that such legend shall be
removed from such shares and the Company shall issue new certificates without
such legend if (i) the holder has sold or disposed of such shares pursuant to
Rule 144(b) under the 1933 Act, or the holder is permitted to dispose of such
shares pursuant to Rule 144(b)(i) under the 1933 Act, (ii) such shares are
registered for resale under the 1933 Act, or (iii) such shares are sold to a
purchaser or purchasers who (in the opinion of counsel to the seller or such
purchaser(s), in form and substance reasonably satisfactory to the Company and
its counsel) are able to dispose of such shares publicly without registration
under the 1933 Act.  Upon such Registration Statement becoming
effective, the Company agrees to promptly issue new certificates representing
such shares without such legend.  Any Warrant Shares issued after the
Registration Statement has become effective shall be free and clear of any
legends, transfer restrictions and stop transfer
orders.  Notwithstanding the removal of such legend, the Purchasers
agree to sell the Conversion Shares and Warrant Shares represented by the new
certificates in accordance with the applicable prospectus delivery requirements
(if copies of a current prospectus are provided to such Purchasers by the
Company) or in accordance with an exemption from the registration requirements
of the 1933 Act.

     

    
      
         

      

      
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    Nothing
herein shall limit the right of any holder to pledge these securities pursuant
to a bona fide margin account or lending arrangement entered into in compliance
with law, including applicable securities laws.

     

    Section
6.2       Registration
Rights.

    


    (a)
 ”Piggy-Back”
Registration.

     

     

    (i)      
If at any time after the date hereof until the first anniversary of the Initial
Closing Date, the Company shall file a registration statement on Form S-1 or
Form S-3 (or any similar or successor forms promulgated by the Commission)
pursuant to an offering of the Company’s Common Stock or Common Stock
Equivalents, except for an underwritten public offering in which case the
inclusion of Registrable Securities shall be subject to the consent and
allocation of the underwriter, the Company shall include the Conversion Shares
and the Warrant Shares (the “Registrable
Securities”) in such registration statement (the “Registration
Statement”); provided that the
amount of Registrable Securities shall be limited to not less than 100% of the
maximum amount (“Rule
415 Amount”) of Conversion Shares and the Warrant Shares which may be
included in a single registration statement without exceeding registration
limitations imposed by the Commission pursuant to Rule 415 of the Securities
Act; provided,
however, that
such piggy-back rights shall not apply to the registration statement on
Form S-1 (File No. 333-147998) and any amendments thereto.

     

     

     (ii)      the
Company will pay all expenses associated with the registration, including,
without limitation, filing and printing fees, and the Company’s counsel and
accounting fees and expenses, costs, if any, associated with clearing the
Registrable Securities for sale under applicable state securities
laws;

     

     (iii)     the
Company shall have the right to delay, including, without limitation, by
delaying the filing or effectiveness of the Registration Statement, the
disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the reasonable opinion of the Company
in the best interest of the Company and, as applicable, suspend sales of
Registrable Securities under an effective registration statement or suspend
trading of its securities on any exchange; and

     

     (iv)   
 the Company will use commercially reasonable efforts to cause the
Registration Statement with respect to the Purchasers to remain continuously
effective for a period (the “Effectiveness
Period”) that will terminate, with respect to the Purchasers, upon the
earlier of (x) the date on which all the Registrable Securities covered by the
Registration Statement have been sold or (y) the date on which all the
Registrable Securities covered by the Registration Statement may be sold
immediately without registration under the Securities Act and without volume
restrictions pursuant to Rule 144(b), as determined by reputable United States
securities counsel to the Company pursuant to a written opinion letter to such
effect, addressed and acceptable to the Company’s transfer agent and the
affected Purchasers, and will advise the
Purchasers when the Effectiveness Period has expired with respect to the
Purchasers.

     

    
      
         

      

      
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    (b)    
Purchaser
Information. Each Purchaser shall (A) furnish to the Company such
information regarding itself, the Registrable Securities, other securities of
the Company held by it and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably requested by the Company to effect
and maintain the effectiveness of the Registration Statement, (B) execute such
documents in connection with the Registration Statement as the Company may
reasonably request and (C) immediately discontinue disposition of Registrable
Securities pursuant to any registration statement upon notice from the Company
of (x) the issuance of any stop order or other suspension of effectiveness of
the Registration Statement by the Commission, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
by the applicable regulatory authorities or (y) the happening of any event, as
promptly as practicable after becoming aware of such event, as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading or
(z) the failure of the prospectus included in the Registration Statement,
as then in effect, to comply with the requirements of the Securities Act until
the Purchaser’s receipt of a supplemented or amended prospectus or receipt of
notice that no supplement or amendment is required.

     

    (c)       Indemnification.

     

     
(i)        In the event any Registrable
Securities are included in the Registration Statement under this Section 6.2, to
the extent permitted by law, the Company will indemnify and hold harmless the
each of the Purchasers (including their officers, directors, members and
partners), any underwriter (as defined in the Securities Act) for the Purchasers
and each person, if any, who controls such Purchaser or underwriter within the
meaning of the Securities Act or the Exchange Act (each a “Purchaser Indemnified
Person”), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law (“Claims”), insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a “Violation”):
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law; and the Company will pay to the Purchaser Indemnified Person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any Claim; provided, however, that the
indemnity agreement contained in this Section 6.2(c)(i) shall not apply to
amounts paid in settlement of any such Claim if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld or delayed), nor shall the Company be liable to any Purchaser
Indemnified Person for any such Claim to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by the Purchaser Indemnified Person. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Purchaser Indemnified Person and shall survive the transfer of the
Registrable Securities by the Purchasers.

      

    
      
         

      

      
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    (ii)       In
the event any Registrable Securities are included in the Registration Statement
under this Section 6.2, to the extent permitted by law, each Purchaser shall,
severally and not jointly, indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6.2(c)(i), the Company,
each of its directors, each of its officers who signs the registration statement
and each Person, if any, who controls the Company within the meaning of the 1933
Act or the 1934 Act (each, a “Company Indemnified
Person”), against any Claim, insofar as such Claims arise out of or are
based upon any Violation, in each case to the extent, and only to the extent,
that such Violation occurs in reliance upon and in strict conformity with
written information furnished to the Company by such Purchaser expressly for use
in the Registration Statement; and, subject to Section 6.2(c)(iii), such
Purchaser will reimburse any legal or other expenses reasonably incurred by any
Company Indemnified Person in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6.2(c)(ii) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the
indemnifying Purchaser, which consent shall not be unreasonably withheld or
delayed. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Company Indemnified Person and shall
survive the transfer of the Registrable Securities by the
Purchasers.

     

    (iii)      Promptly
after receipt by a Purchaser Indemnified Person or Company Indemnified Person
(each, an “Indemnified
Person”) under this Section 6.2 of notice of a Claim, such Indemnified
Person shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6.2, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall, by
giving at written notice to the Indemnified Party within fifteen days after the
Indemnified Party has given notice of the Claim, have the right to participate
in, and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person; provided, however, that an Indemnified Person shall have the right to
retain its own counsel with the fees and expenses of not more than one counsel
for such Indemnified Person to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Purchaser Indemnified Person or Company
Indemnified Person and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person and any
other party represented by such counsel in such proceeding. In the case of any
Company Indemnified Person, legal counsel referred to in the proviso of the
immediately preceding sentence shall be selected by the holders holding at least
a majority in interest of the Registrable Securities included in the
registration statement to which the Claim relates. The Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or Claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Person that relates to such action or Claim. The indemnifying party
shall keep the Indemnified Person reasonably apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Person of a
full and general release from all liability in respect to such Claim or
litigation, and such settlement (a) shall provide for the payment by the
Indemnifying Party of money as sole relief for the claimant, (b) shall not
include any finding or admission as to fault on the part of the Indemnified
Person and (c) shall have no effect on any other claims that may be made against
the Indemnified Party. 

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification
has been made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person under
this Section 6.2, except to the extent that the indemnifying party is materially
prejudiced in its ability to defend such action.

     

    ARTICLE
VII

     

    Termination

     

    Section
7.1       Termination by Mutual
Consent.  This Agreement may be terminated at any time prior to
the Closing by the mutual written consent of the Company and the
Purchaser.

     

    ARTICLE
VIII

     

    Indemnification

     

    Section
8.1       Company
Indemnification.  In consideration of the Purchasers’ execution
and delivery of the this Agreement and acquiring the Securities hereunder and in
addition to all of the Company’s other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Purchasers and all of their respective partners, officers, directors, employees,
members and direct or indirect investors and any of the foregoing person’s
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the “Purchaser
Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Purchaser
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the “Purchaser Indemnified
Liabilities”), incurred by any Purchaser Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate or document contemplated hereby or thereby, (b) any breach
of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate or document contemplated hereby
or thereby.  Notwithstanding the foregoing, Purchaser Indemnified
Liabilities shall not include any liability of any Purchaser Indemnitee arising
out of such Purchaser Indemnitee’s gross negligence or willful
misconduct.  To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Purchaser
Indemnified Liabilities which is permissible under applicable law.

     

    
      
         

      

      
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    Section
8.2       Purchaser
Indemnification.  In consideration of the Company’s execution
and delivery of this Agreement and issuing the Securities hereunder and in
addition to all of the Purchaser’s other obligations under the Transaction
Documents, the Purchaser shall defend, protect, indemnify and hold harmless the
Company and all of its partners, officers, directors, employees, members and
direct and indirect investors and any of the foregoing person’s agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the “Company Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Company Indemnitee is a party to the
action for which indemnification hereunder is sought), and including reasonable
attorney’s fees and disbursements (the “Company Indemnified
Liabilities”), incurred by any Company Indemnitee relating to violations
of the 1933 Act, as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Purchaser in the Transaction Documents or any other certificate or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Purchaser contained in the Transaction Documents or any other
certificate or document contemplated hereby or
thereby.  Notwithstanding the foregoing, Company Indemnified
Liabilities shall not include any liability of any Company Indemnitee arising
out of such Company Indemnitee’s gross negligence or willful misconduct and the
Purchaser shall only be required to make indemnification to the extent of the
aggregate dollar amount of the Notes purchased by it. To the extent that the
foregoing undertaking by the Purchaser may be unenforceable for any reason, the
Purchaser shall make the maximum contribution to the payment and satisfaction of
each of the Company Indemnified Liabilities which is permissible under
applicable law.

     

    ARTICLE
IX

     

    Governing Law;
Miscellaneous

     

    Section
9.1      Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts to be
wholly performed within such state and without regard to conflicts of laws
provisions.  Any legal action or proceeding arising out of or relating
to this Agreement and/or the Transaction Documents may be instituted in the
courts of the State of New York sitting in New York County or in the United
States of America for the Southern District of New York, and the parties hereto
irrevocably submit to the jurisdiction of each such court in any action or
proceeding.  Subscriber hereby irrevocably waives and agrees not to
assert, by way of motion, as a defense, or otherwise, in every suit, action or
other proceeding arising out of or based on this Agreement and/or the
Transaction Documents and brought in any such court, any claim that Subscriber
is not subject personally to the jurisdiction of the above named courts, that
Subscriber’s property is exempt or immune from attachment or execution, that the
suit, action or proceeding is brought in an inconvenient forum or that the venue
of the suit, action or proceeding is improper.

     

    
      
         

      

      
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    Section
9.2       Counterparts.  This
Agreement may be executed by facsimile and in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute one
agreement.  Execution and delivery of this Agreement by facsimile
transmission (including delivery of documents in Adobe PDF format) shall
constitute execution and delivery of this Agreement for all purposes, with the
same force and effect as execution and delivery of an original manually signed
copy hereof.

     

    Section
9.3       Headings.  The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

     

    Section
9.4      Severability.  If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.

     

    Section
9.5       Costs and
Expenses.  All reasonable out-of-pocket costs and expenses
incurred by Axiom and the Purchasers with respect to this Agreement and the
Offering shall be paid by the Company at the Closing including, without
limitation, legal fees and expenses of up to $60,000.  The Company
shall also be responsible for the payment of Axiom’s and the Purchasers’
reasonable post-Closing expenses incurred in connection with the transactions
contemplated by this Agreement.  Such post-Closing expenses shall be
paid promptly after Axiom issues a request in writing but in no event later than
two (2) business days following such request.

     

    Section
9.6       Entire Agreement;
Amendments; Waivers.

     

    (a)           This
Agreement supersedes all other prior oral or written agreements between the
Purchasers, the Company, their affiliates and persons acting on their behalf
with respect to the matters discussed herein, and this Agreement and the
instruments referenced herein (including the other Transaction Documents)
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters.  No
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Purchasers, and no provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought.

     

    (b)           The
Purchasers may at any time elect, by notice to the Company, to waive (whether
permanently or temporarily, and subject to such conditions, if any, as the
Purchasers may specify in such notice) any of Purchasers’ rights under any of
the Transaction Documents to acquire shares of Common Stock from the Company, in
which event such waiver shall be binding against the Purchasers in accordance
with its terms; provided, however, that the
voluntary waiver contemplated by this sentence may not reduce the Purchasers’
obligations to the Company under the Transaction Documents.

     

    
      
         

      

      
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    Section
9.7      Notices.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing, must be delivered by
(i) courier, mail or hand delivery or (ii) facsimile,
and will be deemed to have been delivered upon receipt. The addresses and
facsimile numbers for such communications shall be:

     

    If to the
Company:

    


    Sino Gas
International Holdings, Inc.

    No.18
Zhong Guan Cun Dong St.

    Haidian
District

    Beijing, P.R. China

    Fax: (86-10) 8260-0042

    Attention:  Yuchuan
Liu, Chairman and CEO


    


    
      With a
copy to:

    

    


    Jiannan
Zhang

    Cadwalader,
Wickersham & Taft LLP

    2301
China Central Place Tower 2

    No. 79
Jianguo Road, Beijing 100025, China

    Fax:
(86-10) 6599-7300

    


    If to the
Purchasers, to the addresses listed on Schedule I
hereto:

    


    With a
copy to:

    


    Axiom Capital Management,
Inc.

    780 Third
Avenue, 43rd floor

    New York,
NY 10017-2024

    Fax:
(212) 521-3888

    Attention:
Mark D. Martino, President

    


    With a copy to:

    


    Wollmuth Maher & Deutsch
LLP

    500 Fifth Avenue

    New York, NY 10110

    Fax: (212) 382-0050

    Attention: Gerald Coviello,
Esq.

     

    
      
         

      

      
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    Each
party shall provide five (5) days prior written notice to the other party of any
change in address, telephone number or facsimile number.  Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by an
internationally recognized overnight delivery service, shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.

     

    Section
9.8       Successors and
Assigns.  Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns, including any Permitted Assignee (as defined
below).  The Purchaser may assign some or all of its rights hereunder
to any assignee of the Note, the Warrants, the Conversion Shares, or Warrant
Shares (in each case, a “Permitted Assignee”);
provided,
however, that any such assignment shall not release the Purchaser from its
obligations hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption.

     

    Section
9.9       No Third Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.

     

    Section
9.10      Survival. The
representations, warranties, rights to indemnification and agreements of the
Company and the Purchaser contained in the Agreement shall survive the delivery
of the Notes.

     

    Section
9.11     Further
Assurances.  Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

     

    Section
9.12     No Strict
Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.

     

    Section
9.13     Remedies.  The
Purchasers and each Permitted Assignee shall have all rights and remedies set
forth in this Agreement, the Pledge Agreement and the Notes and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law.  Any person having any rights under any provision of any such
Transaction Document shall be entitled to enforce such rights specifically
(without posting a bond or other security), to recover damages by reason of any
breach of any provision thereof and to exercise all other rights granted by
law.  The Purchasers and each Permitted Assignee without prejudice may
withdraw, revoke or suspend its pursuit of any remedy at any time prior to its
complete recovery as a result of such remedy.

     

    
      
         

      

      
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    Section
9.14     Payment Set
Aside.  To the extent that the Company makes a payment or
payments to the Purchaser hereunder or under the Note or the Purchaser enforces
or exercises its rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

     

    Section
9.15     Days.  Unless
the context refers to “business days” or “Trading Days”, all references herein
to “days” shall mean calendar days.

     

    Section
9.16     Placement
Agent.  Other than the engagement of Axiom by the Company, the
Purchaser and the Company each acknowledges and warrants that it has not engaged
any placement agent in connection with the sale of the Securities, and the
Company and Purchasers shall indemnify and hold the other harmless against any
liability, loss, or expense (including without limitation, reasonable attorneys’
fees and out-of-pocket expenses) arising from any breach of said
warranty.

    


     

    [SIGNATURE PAGE
FOLLOWS]

     

    
      
         

      

      
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    IN WITNESS WHEREOF, the
parties hereto have caused this Securities Purchase Agreement to be duly
executed as of the date and year first above written.

     

     

    
      COMPANY:

    

    


    


    
      
        
          	
                  SINO
      GAS INTERNATIONAL HOLDINGS, INC.

                   

                  By:_______________________________

                  Name:

                  Title:

                
	 
	 
	
                  PURCHASER

                   

                  By:_______________________________

                  Name:

                  Title:

                


        

      

    

    


    
      
         

      

      
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